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Why planning is crucial on Forex and what will happen if you have none.
It seems like in such a complex area as trading with all its peculiarities, including numerous strategies, orders, and instruments, people have to appreciate planning. However, this expectation is far from reality. For some traders, making a plan is just a waste of time because they think they are gurus of keeping everything in mind and coping with their emotions right in the market. It is a common mistake, and we would like to explain why.
If you neglect planning, your trading experience may be bright, but not for so long as it can be. Like in business, predictions in trading mean a lot. You cannot rely on your intuition only if you do not know what your next step is and where it will lead you.
Without a plan, there is no future. Of course, we are laying on the colours too thickly. To be honest, the world is your oyster – if you want to improve your performance, you will listen to experienced traders or financial analysts. If you do not want – you will go by. It is up to you to decide, and we have no power to over-persuade you.
For those who are still interested (we hope there is plenty of acquisitive minds among our readers), we have prepared a bunch of insights on how to make your own trading plan and why this thing is of high importance.
A trading plan itself may be defined as a systematic approach to trades that takes into account time, risks, and investor preferences. You have to write it down to make your life easier as well as your head free from loads of diverse information.
If possible, the signals that the plan covers should be clear and unchanged while you are in the trading process. The program may be adjusted along with changing market conditions or improving trader’ skills.
Someone else’s trading plan does not suit your needs. It is impossible to find two identical styles or approaches. Each trader has their own aims and uses their personal favorites among trading instruments. In this case, equality in trading is a confusing myth. So you have to prepare your plan the way it can reflect all the aspects that make trading process more objective and calm, and we will help you with it a bit later. Now, let us discuss what is wrong with failing at planning.
Following the other trader’s plan, you will not reach your personal goal, following no plan at all, you will not achieve any goals. If your actions on Forex are unguided, your moves become chaotic. You are crammed with feelings, panic may arise when trends change their directions, and it is almost impossible to figure it out. Brrr…what a horrible picture! Being a freshman in the game makes it even more awful. To prevent losses provoked by the lack of preparations, do your homework right - read educational materials, watch webinars, and check out the trading plan recommendations.
There are the most relevant and universal aspects the plan should include:
Are you a novice trader or an experienced one? Do you have enough confidence to follow the signals that you place in your plan? Do you think you are ready to try trading in a live market environment? You have to answer all these questions before you start.
This criterion has a close connection with the previous one. You should know exactly why you are trading and set daily, weekly, and annual trading targets. Your goals mostly define your trading style.
In the first part of this article, we have discussed your homework. So, besides Forex essential knowledge base, there are many other sources of information to look through. Get ready to keep abreast of financial news and events. They may influence the market conditions, and you can use the changes in your favor.
This parameter has to be precise. The more accurate you know the time you can spend trading on Forex, the more distinct actions you can take.
Before opening a trade, you have to set realistic profit expectations and risk ratio targets. Decide how much you are able to risk on one trade. It will help you not to lose more than you can afford. Moreover, make acquaintance with the risk management rules and use them in your trading.
Focus on a list of instruments. It works because if you see them clearly, there is no need in tearing your attention apart by following as many charts as possible and trying to catch the best one.
Try the strategy in advance – before you open a trade. It makes you feel more self-assured in the real environment and less distracted if something goes wrong. For reaching this purpose, you can train yourself and try different strategies in Demo accounts.
You have to know when and where to enter and exit the market. Write down the conditions that have to meet for your target, stay disciplined, and remember that exits are far more important than entries.
It is an excellent piece of educational pie. If you win, you have to know how and when. The same picture with losses. Note the following details: the time spent on each trade, targets, entries and exits, support and resistance levels, the time market opens and closes for the day, etc. Gain experience and learn from your mistakes.
Keeping a trading journal is useful for every trader in terms of working on performance development. Based on time, for instance, you can calculate the efficiency of the trades or the relevance of the system you have chosen. It allows you to make comparisons and conclusions. That stands up profound traders among the others.
Trading is a business in some sense. If you treat it that way, act as if you are in - try different models, take emotions out of the decision-making process, learn from experience, and never give up on educating yourself. Trade wisely with FBS!
